Target’s Poor Sales Accelerate Wesfarmers Review

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By Published On: April 28, 20200 Comments

Wesfarmers is accelerating a review of the retailer following a sharp downturn in sales throughout April. Due to stores closing across shopping centres around the country, this has resulted in the possible restructuring or sale of the retailer. 

In a statement by Rob Scott, the Managing Director of Wesfarmers, on Tuesday, noted that Kmart’s sales continue to increase as it converts three stores into ‘dark stores’ to support the ‘growing online business’.  Moreover, Bunnings and Officeworks have experienced an increase in sales due to the introduction of its new Drive & Collect initiative.

“In recent weeks, our retail businesses have also made significant progress in further enhancing their respective digital offers whole responding to the substantial increase in online sales,” Scott said. “This includes the implementation of Drive & Collect by Bunnings and Officeworks, enabling contactless carpark collection by customers, and the conversion of three Kmart locations to ‘dark’ stores to support its growing online business.”

However, Target’s sales have experienced a sharp downturn in April due to closures of stores across the country. The department store has been showing signs of trouble for several months, with a decline in key categories, including apparel.

“Given the high degree of fixed occupancy costs, a sustained decline in sales momentum will have a material impact on the profitability of Kmart and Target,” the statement read. “Margins have also been impacted by higher levels of clearance activity and the increased cost of online fulfilment. While Kmart remains profitable, Target earnings have decreased significantly.”

The review of Target aims to accelerate the performance of the chain, which include the actions needed to improve shareholder returns and create a commercially viable brand image.

“COVID-19 has had a profound impact on our way of life and business operations and the actions we are taking with our balance sheet and in our businesses are focused on sustaining performance in an uncertain future,” Scott said on Tuesday. “We recognise that this is an uncertain and worrying time for many team members and customers. Across the Group, we remain focused on the health and safety of our team and our customers and the actions we can take to support our team, our customers, our suppliers and the community.”

Wesfarmers has reported an increase in sales from Bunnings, which has risen 5.3 percent in March and April. Moreover, Officeworks has experienced an 11.9 percent lift in sales over the same period.

On March 31st, Wesfarmers sold 5.2 percent of its share with Coles as a result of Wesfarmers’ interest falling more than ten percent for $1.06 million. This follows a sale of 4.9 percent of Coles in February 2020 for $1.05 million. Following the transaction, Wesfarmers retains a 4.9 percent interest in Coles.

Catch Group has continued to grow since its acquisition by Wesfarmers in August 2019, with ‘very strong growth in gross transaction value in both the marketplace and in-stock offering’.

The review of Target will be complete before the end of June.

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